Study Of Spain's 'Google Tax' On News Shows How Much Damage It Has Done

from the ancillary-copyright-is-a-bad-idea dept

As you may recall, governments across Europe, generally at the behest of traditional newspaper publishers, have been pushing for what they call an "ancillary copyright," but which is much better referred to as a "snippet tax" or a "link tax." Or, if people are being honest: a Google News tax. The idea is that any aggregator site that is linking out to other sources with little snippets telling people what's at the link, has to pay the original publication to link to them. If you think this goes against the entire concept of the internet, you're not wrong. Belgium was the first country to try it, and Google responded by removing complaining publications from Google News. In response, the publications then complained that Google News was being mean to them, even though they were the ones complaining. In Germany, a similar thing happened, whereby Google left the complaining publications in Google News, but without snippets since that was a key aspect of the law. Again, the publishers screamed "unfair" even though they were the ones who had pushed for the law in the first place.

When it came time for Spain to try to appease its misguided and angry publishers, the government sought to avoid the tactics that Google had done in the past and thus made it mandatory to pay, saying that sites themselves couldn't even opt-out of getting payments, even if they didn't want them. In response to this, Google broke out the somewhat surprising "nuclear option" and shut down Google News in Spain entirely. It seemed quite obvious that this move would create huge problems for media properties that wanted to be open and wanted people to link to them.

After the law went into effect, the Spanish Association of Publishers of Periodical Publications (AEEPP) commissioned an economic study about the impact of the new Spanish ancillary copyright law -- and found (not surprisingly) that the legal change (and the shuttering of Google News and other aggregators) was absolutely harmful to the Spanish news media and innovation in general. It also found strong evidence that, contrary to what those fighting against Google News have claimed, aggregators expand the market for the original sources, rather than shrink it by acting as a substitute. The latter is based on a "study of studies" basically, looking at all of the academic literature in terms of the impact of aggregators -- all of which shows that it increases the overall size of the market, rather than shrinks it.

However, the really telling part of the report is that this law that was passed in the name of helping news publications, ended up doing tremendous harm to many online publications -- especially smaller sites that frequently (and happily) relied on Google News and other aggregators for a significant amount of traffic. The report points out that it wasn't just Google News that shut down because of this law: a whole bunch of local Spanish aggregators shut down themselves, switched business models entirely, or similarly left the Spanish market entirely. The report notes that sites like Planeta Ludico, NiagaRank, InfoAliment and Multifriki shut down entirely, as they were scared of the economic and legal liability from the new law.
The report notes the case of NiagaRank is particularly troubling as it has a wider impact on innovation in Spain:

NiagaRank: ignoring the extent, quantity and methods followed to determine whether
they should pay the fee, they preferred to close down. This case is remarkable because
NiagaRank was not a “traditional” aggregator, but it analysed social networks to draw
up lists with the most relevant news (“active listening”, as they used to call it).
However, it is an example of the legal uncertainty that the lack of definition of key
aspects of the act has caused.

[....]

For example, and as already pointed out, currently there are several services focused on the
aggregation of content for mobile phones, such as the mobile applications Zite and Flipboard.
The amendment to the act will discourage the introduction of this sort of services in Spain, as
well as the potential development of new models. A clear example of this situation is the
portal NiagaRank, an innovative aggregator based on the analysis of the content published
on social networks (similar to News360 or Prismatic) which, as mentioned before, also closed
down as a direct result of the law amendment.

And all of this has had a tremendous negative impact on the press, rather than a positive one as those behind the law insisted.

The negative impact on the online press sector is also very clear, since a very important
channel to attract readers disappears, resulting in lower revenues from advertising. In addition,
the new fee is also a barrier to the expansion of small publications with little-known brands,
and an entry barrier for new competitors, since they will be unable to count on these
platforms to increase their readers’ base.

The evidence available so far shows that the impact on traffic has been negative and that less
consolidated publishing titles, such as digital native newspapers, have been the worst affected.
This is not only because the total number of publication readers has been reduced but, in the
case of online readers that would be attracted anyway (that is, who would visit the
publications web sites in some other way), they will surely end up visiting known
publications with established brands, to the detriment of small and new publications, in line
with the evidence in the literature analysed above

Of course, for the major newspaper publishers, maybe that's what they really wanted all along: less competition. But it's difficult to see how that's a legitimate public policy strategy.

And, not surprisingly, looking at multiple different ways of measuring these things, traffic to all Spanish news sites dropped after the law went into effect:

A simple traffic analysis of Spanish digital newspapers in the first three months of 2015
based on data from ComScore also suggests results in line with the aforementioned. The
impact of the closing down of Google News and some other aggregators has generated a
decline of visitors to the 84 major Spanish online newspapers...

The report notes that this is even more stunning given that overall internet traffic and usage in Spain has been increasing, so even the percentage drop in traffic undercounts the real impact, as it likely would have been growing.

The data, not surprisingly, shows that the impact on smaller news publishers has been the worst -- again consistent with the idea that all this law really does is lock out competition for the larger players:

A more detailed analysis, breaking down traffic depending on the newspaper size, also
confirms that the effect has been uneven. Thus, for the sample of online newspapers in Spain,
it appears that smaller newspapers have been the worst affected ones.

All of this should really raise serious questions about just what is the intent of the Spanish government in passing this law. It does not appear to serve any legitimate public policy. At best, it appears to have damaged small news publications, making it more difficult for them to compete against larger publications, though it has also served to damage those larger publications' traffic as well.